Jack Townsend offers this blog on Federal Tax Crimes principally for tax professionals and tax students. It is not directed to lay readers -- such as persons who are potentially subject to U.S. civil and criminal tax or related consequences. LAY READERS SHOULD READ THE PAGE IN THE RIGHT HAND COLUMN TITLE "INTENDED AUDIENCE FOR BLOG; CAUTIONARY NOTE TO LAY READERS." Thank you.

Monday, July 29, 2013

Janet Novack reports this morning that the IRS has filed John Doe Summons "petitions in nine different federal district courts asking judges to approve summonses for records that could reveal the identities of Norwegian taxpayers with secret U.S. bank accounts and of residents of Norway who should be, but aren’t, paying taxes there." U.S. Seeks PNC, Wells Fargo, JP Morgan Records To Find Tax Cheats--From Norway (Forbes 7/28/13), here. The summonses are sought pursuant to Norway's request under the double tax exchange of information provision, which requires a treaty partner upon the request of the other to use internal processes to obtain information relevant to taxes of the requesting treaty partner.

Further, Ms. Novack reports::

Already, judges have approved previously unreported summonses for records from PNC Bank and RBS Citizens in the Western District of Pennsylvania; USAA Federal Savings Bank in the Western District of Texas; BOKF and 66 Federal Credit Union in the Northern District of Oklahoma; Prairie Sun Bank in Minnesota; and East West Bank and Global Cash Card in the Central District of California. Summons requests involving Wells Fargo WFC -0.32% and JP Morgan Chase, among others, are pending. There is no suggestion in the DOJ’s court filings that any of the U.S. institutions have done anything improper.

Each of the summonses

asks for information about bank account applications, signature cards and other records tied to one or a few specific payment or credit card numbers that have been used over a period of years for ATM withdrawals and other transactions in Norway which require a PIN, but don’t require the card holder’s name. For example, according to a court-filed affidavit from IRS agent Cheryl Kiger, Norway reports one East West Bank payment card it wants information about was used from 2004 through 2012 for 661 transactions in Norway totaling 1,305,400 Norwegian Krone (NOK). (That’s $221,918 at an average exchange rate for the period of one Krone equaling 17 U.S. cents.)

I will post more as I receive it, but obviously if the U.S. insists on such John Doe treaty requests when it makes them, it will have to reciprocate when treaty partners make them. In this regard, historically exchange of information treaty requests have required some identification of the taxpayer. However, as observers of the U.S.-Swiss spat know, Switzerland has recently approved "group requests" -- I call them John Doe treaty requests. See Swiss Court Ruling in Credit Suisse Case (Federal Tax Crimes Blog 7/8/13), here.
Readers should also read the comments to Ms. Novack's posting. One of the commenters is "justme" is known on this blog as Just Me or Just Me Also. His comments are always good.

Addendum 7/19/13 3:22 pm:

See the DOJ Tax Announcement: Federal Courts Authorize Service of John Doe Summonses Seeking Identities of Persons Using Payment Cards in Norway (7/29/13), here. Excerpts:

The lawsuits are a part of ongoing international efforts to stop persons from using foreign financial accounts as a way to evade taxes. Courts have previously approved John Doe summonses allowing the IRS to identify individuals using offshore accounts to evade their U. S tax obligations. In the present suits, the Justice Department is seeking the identities of persons who may be attempting to hide their Norwegian taxable income in U.S. financial accounts.

Below is a list of the decided and pending cases. Copies of the pleadings will be made available on the Tax Division’s website :

Petitions Granted:
In the Matter of the Tax Liabilities of John Does , Case No. 13-cv-01097 (C.D. Calif.)
In the Matter of the Tax Liabilities of John Doe , Case No. 13-mc-00056 (D. Minn.)
In the Matter of the Tax Liabilities of John Does , Case No. 13-mc-00024 (E.D. Va.)
In the Matter of the Tax Liabilities of John Does , Case No. 13-mc-00018 (N.D. Okla.)
In the Matter of the Tax Liabilities of John Does , Case No. 13-cv-01066 (W.D. Pa.)
In the Matter of the Tax Liabilities of John Doe , Case No. 13-mc-00657 (W.D. Tex.)
In the Matter of the Tax Liabilities of John Doe , Case No. 13-mc-00232 (W.D. Tex.)
Pending Petitions:
In the Matter of the Tax Liabilities of John Does , Case No. 13-cv-03393 (N.D. Calif.)
In the Matter of the Tax Liabilities of John Doe , Case No. 13-mc-00301 (S.D. Miss.)
In the Matter of the Tax Liabilities of John Doe , Case No. 13-mc-00038 (D. N.H.)

3 comments:

It is possible that some of these accounts may turn up no breach of Norwegian law, for example someone in the US may be supporting his elderly parents in Norway and letting them use his ATM card.

There is of course the big difference between the request for the identity of the holders of US-issued ATM cards that have been used with high frequency in Norway, and the blanket requests of the US for foreign banks to identify accounts held by US citizens with balance over a certain threshhold. For this reason the number of accounts involved is likely to be small, and seems to be more a token gesture on the part of the US than a big move towards reciprocity, but who knows?

What would be big news would be if the US were to require the turning over of all accounts over $500K held by Mexicans, Chinese, and Russians. Even bigger news would be if these banks had to pay fines to Norway for helping Norwegians evade Norwegian taxes.

The addendum did answer a few questions of mine one of which is how involved is DOJ Tax in all of this. The answer is it appears very. Still I question how much of this is a one off deal or whether we will see more cases like this.

All in though DOJ Tax can't be completely thrilled is it takes at least a little bit of sting out of the current cases vis a vis the Swiss bank.

One additional question I do have though is how involved are the local US Attorney's in these types of cases. I know they can be overruled by DC but it is pretty rare.

Several of the banks listed are not exactly major financial institutions (with the exception of JP Morgan Chase and Wells Fargo.) It seems plausible that they were approached by Norwegians who happened to be in the US on vacation or visiting relatives and opened an account saying it was needed for convenience (as is the case for Canadian snowbirds, for example.) And the news article says that "There is no suggestion in the DOJ’s court filings that any of the U.S. institutions have done anything improper."

And yet if a foreign bank opens an account for an American, DOJ press releases state that the bank conspired to aid the US person in evading US taxes and hiding the money from the IRS. Yet when a non-resident foreigner opens an interest bearing account at a US bank, they sign IRS form W-8 so that no taxes are withheld from the account AND therefore no 1099 is provided to the IRS. Therefore the IRS knows nothing about these accounts, not the interest income and not even the account's existence. There is no withholding on interest on US Treasury bills for nonresident foreigners, either.

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